Itaú BBA - Primary deficit of BRL 188.7 billion in June

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Primary deficit of BRL 188.7 billion in June

July 31, 2020

Fiscal deterioration, amid a pandemic

• The consolidated public sector posted a primary deficit of BRL 188.7 billion in June, which was better than market consensus (BRL 198.4 billion) and our forecast (BRL 205 billion). The central government experienced a deficit of BRL 194.7 billion under the National Treasury’s methodology (which considers the gap between revenues and expenses), somewhat better than our BRL 201 billion estimate. Excluding revenue and expense measures implemented to fight the coronavirus crisis, the primary deficit would be BRL 69.7 billion. Regional governments posted a surplus of BRL 5.8 billion (vs. an estimated deficit of BRL 4.8 billion), while state-owned companies delivered a BRL 0.7 billion surplus. The consolidate d primary deficit over 12 months widened to 6.4% from 3.9% of GDP.

• The general government’s gross debt climbed to 85.5% of GDP in June from 81.9% in May, while net debt rose to 58.1% of GDP from 55.0%. Over 12 months, the nominal deficit excluding swap transactions widened to 10.4% from 8.0% of GDP. 

• Contracting economic activity and measures implemented to cushion the impact of the coronavirus crisis will cause sharp deterioration in fiscal results in 2020, but it is vital not to create permanent expenses, so that the gradual fiscal adjustment enabled by the spending cap constitutional amendment can resume from 2021 onwards.

Pedro Schneider


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